HOW P. T. BARNUM HELPED INVENT BUSINESS ETHICS.
By: John Mueller
T HE LEGENDARY IMPRESARIO P. T. BARNUM (1810-1891) IS BEST KNOWN as a consummate charlatan whose perspective on life and business is summed up in the contemptuous contention, “There’s a sucker born every minute.” It is testimony to the power of first impressions that this popular image persists even though it is very substantially wrong. In fact, not only did the great showman never make the statement, but it would have been wildly out of character for him to have uttered it.
Contrary to his popular image, Barnum generally conducted his business enterprises in a virtuous manner, respecting his customers and making sure they were satisfied. Indeed, he was among the first to appreciate fully—and to articulate— that an honest approach was the most reliable path to long-term wealth. He was, in other words, one of the pioneers of business ethics.
As A.H. Saxon points out in his superb biography, P. T. Barnum: The Legcnd and the Man (1989), much of the fault for the showman’s lasting reputation lies with Barnum himself. In 1854, at the strikingly early age of 44, Barnum penned the first edition of his autobiography. In it, he frankly and exuberantly exposed the various deceptions and “humbugs” of his early business life. Notorious among all these was his manager-ship of a mentally agile, if physically decrepit, 80-year-old black woman who claimed convincingly not only to be 140 years old but to have been George Washington’s nurse. Then there was his exhibition of the absurd and disgusting “Feejee Mermaid” that seemed upon examination to be the head and upper torso of a dead monkey crudely sewn to the body of an equally dead fish—which is exactly what it was.
That early autobiography has now been reprinted by the University of Illinois Press with a lively introduction by Terence Whalen, a literary scholar at the University of Illinois-Chicago who specializes in 19th-century America. Both the reprint of the autobiography and Whalen’s introduction will probably serve to perpetuate the image of Barnum as a con man.
In his Life and other writings, Barnum attempted to defend himself from the negative image with two stratagems. First, he insisted that his book performed a public service by exposing deceptive business practices. For example, at the age of 19, he engaged in the lottery business and was shocked to discover that only a rather small percentage of the take was paid out in prizes—about the same as in state lotteries of our own day, as it happens. He emphatically, if ineffectually, warned people against squandering their money on this “ruinous infatuation.” As Whalen observes, however, he never really apologized in this autobiography for any duplicitous business behavior, and it is easy, if not entirely fair, to join Whalen in dismissing such somewhat sanctimonious and self-conscious protestations as an effort to profit doubly from the deceptions: first by carrying them out, then by exposing them in a lucrative book.
Barnum’s more compelling defense was quantitative, again in a double sense. To begin with, the colorful “humbugs” of his early career represented only a small portion of his business efforts. He pointed out that the vast majority of his enterprises were in fact “undoubtedly legitimate.” There was, in particular, his exhibition of the truly talented midget Tom Thumb (Barnum did admit to exaggerating the age of the crowd-pleasing performer) and his wildly successful management of the one and only “Swedish Nightingale,” soprano Jenny Lind, whose tours, Barnum suggested with some reason, helped elevate and refine the country’s musical tastes. More pertinently, Barnum made an important financial discovery during the course of his business career. He observed that nearly all his deceptive schemes “ended in disaster,” reducing him “to the pinching income of $4 per week,” whereas his fortune derived almost wholly from the legitimate enterprises.
Barnum thus learned that, in business, virtue is considerably more than its own reward . News about this discovery can easily be lost when it is imbedded among picturesque yarns about humbugs, but it was of great significance to Barnum, and, more broadly, it was probably important to the massive economic expansion that took place in what we now call the developed world during and after his lifetime.
T he first third of the autobiography is devoted to life, and particularly business life, as Barnum experienced it in Bethel, Connecticut, during his first 25 years. Judging from his description, business in general was often characterized by deception, fraud, and swindle. As a consequence, people continually had to be alert to the possibility of being cheated by confidence schemers and sharp dealers. The expression “Yankee trader” carries this cautionary connotation to the present day.
Barnum’s great discovery was not so much that such behavior is immoral but that from a business standpoint it is stupid. Toward the end of his autobiography, Barnum was already groping toward a set of business principles that developed this key insight. In the next years, he worked his ideas into a lecture, “The Art of Money -Getting,” and gave it widely with great success (and financial profit), eventually incorporating it in 1869 into his second, more circumspect, autobiography, which he titled—with typical self-effacement —Struggles and Triumphs. This remarkable tract is filled with the kind of wisdom that successful business people now generally take for granted. Integrity and honesty make sound business sense, argued Barnum, because “no man can be dishonest without soon being found out and when his lack of principle is discovered, nearly every avenue to success is closed against him forever. ” Therefore, “as a mere matter of selfishness “he concluded, “honesty is the best policy
Similarly, Barnum argued that fair trading is the best method for carrying out any business if one is pursuing long-term advantage. Men who drive sharp bargains with their customers, acting as if they never expected to see them again, will not be mistaken,” he wrote . And it is good for the bottom line to treat all people well: “Politeness and civility are the best capital ever invested in business.” Moreover, although charity should be “a duty and a pleasure,”there is advantage to it as well. Noted Barnum, “even as a matter of policy, if you possess no higher incentive, you will find that the liberal man will command patronage, while the sordid, uncharitable miser will be avoided.”
By and large, Barnum carried out his various enterprises in line with such principles. He treated his employees and performers with respect, his customers with civility and attentiveness, and his fellow deal makers with integrity and reliability. Nothing illustrates this better than Barnum’s experience with the circus, an enterprise he took on late in life, and the one that has become most associated with his name.
Before Barnum, circuses were very often run by fly-by-night cheats: ticket takers would regularly short-change customers; pickpockets, working on a commission arrangement with the owners, would roam the grounds; “Monday men” would steal the wash from clotheslines or burglarize homes when townsfolk were at the performance or watching the circus parade; and games of chance would be fixed.
Operators made quick profits this way, but soon the entire industry was on the very verge of extinction because its customers, through experience, were no longer foolish enough to attend. Barnum was one of the circus innovators who changed all that. He used honest ticket takers, hired private detectives to police pickpockets, and spent a lot of time and money creating what he modestly billed as “The Greatest Show on Earth.” Whether customers always fully agreed with that re-presentation, they did find the show, and the whole experience of attending the circus, enjoyable, and they were happy to come back year after year. Accordingly, Barnum and such like-minded circus managers as the Ringling Brothers, applying their own “Sunday School” approach to the enterprise, soon became far richer than the cheats that had preceded them.
One of Barnum’s biographers, Neil Harris, dismisses “The Art of Money-Getting” as “a collection of platitudes” that merely repeat “the conventional wisdom of [the] era.” (He also overlooks Barnum’s repeated insistence on the profitability of honesty.) But the examples of the circus and of Barnum’s early business experience suggest that these principles were by no means obvious at the time. Moralists have routinely prescribed virtue, but the notion that the application of virtue to the business arena is profitable seems to have been something of a new idea—an inno-vation.
Although one can find earlier glimmerings of Barnum’s business principles—in writings by Benjamin Franklin, for example—“The Art of Money-Getting” is the earliest publication I have been able to find in which the profitability (as opposed to the simple moral value) of virtuous business behavior is clearly, specifically, and extensively laid out.
The importance to economic development of this discovery is suggested by one of Barnum’s observations: “The public very properly shun all whose integrity is doubted.” It follows that when business practices are routinely sharp, uncivil, grasping, and deceitful—as they often were in Barnum’s hometown of Bethel— people will tend to avoid doing business because, essentially, transaction costs are high. And economic growth will accordingly suffer. By contrast, when business is conducted virtuously, economies will, all other things being equal, flourish.
B y the end of Barnum’s life, business in the areas of the world that were rapidly developing was increasingly conducted according to his principles—something that no doubt contributed to that very development. As sociologist Max Weber observed at the time, “Absolute unscrupulousness in the pursuit of selfish interests was characteristic of “precisely those countries whose bourgeois-capitalistic development.. .has remained backward.” And economist Alfred Marshall noted that although the modern economy had “undoubtedly given new openings for dishonesty in trade,” it was nonetheless being carried out with “habits of trustfulness” and honesty “which do exist among a backward people,” where, as in the Bethel .of. Barnum’s. youth, business. continued to be conducted with “an evil sagacity in driving a hard bargain.”
However, Barnum will doubtless continue to be remembered chiefly for his occasional, and mostly youthful, scams and humbugs, not for his discovery of the profitability of virtue in business. Terence Whalen’s introductory essay certainly seeks to perpetuate the “soft con” image. He calls Barnum a “serial-hoaxer” in whose hands “poetic license was often a license to steal”; he stresses the show-man’s “profitable deceptions and schemes,” his “knack for making capital out of falsehood,” and his “habitual dissembling.”
But Whalen’s ultimate target is broader. He asserts that Barnum’s biography “exposes the illusory or arbitrary nature of an entire economic system” in which the public becomes “victim.” Although he acknowledges that Barnum’s revenues were substantially derived from repeat customers, he insists that Barnum only “occasionally” gave the public its money’s worth. Endlessly, if creatively, duped, Whalen suggests, paying spectators became “the unwitting progenitors of modern consumer society.” Clearly, it is Whalen, not Barnum, who imagines the public to be a self-perpetuating confederation of suckers.
John Mueller (bbbb@(osu.edu) is
professor of political science at Ohio
State University. His most recent book
is Capitalism, Democracy, and Ralph’s
Pretty Good Grocery (Princeton Univer-
( March 2001. Vol. 32. Vol. 10.)
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